Where and How do US firms land in Europe?
Language and Cultural proximity are the first selection criteria.
The US companies expand in Europe as the first destination especially in the software industry.
- 75 % of top-tier companies chose London, Dublin, or Amsterdam as their first landing spot. The choice is driven by the feeling of an easier communication pattern.
- 63 % of US B2B Software companies opened their first office in the UK. Among those 63 %, 60 % choose London. Cambridge, Belfast, and Manchester arrive as the second choice.
- 10 % choose Ireland, mainly Dublin . 6 % went for Amsterdam. Paris and Berlin get selected by only 3 % as the first office opening in Europe.
The popularity of Amsterdam and Dublin is related to the low corporate tax advantages offered by the 2 cities.
Although Paris, Berlin, or Madrid may offer great infrastructure and business environments, they are often chosen as a landing base for the 2nd or 3rd office only. Once companies got successful in establishing their first office, they see it as an opportunity to get closer to their larger customers.
On average they have opened their first office within 6 to 8 years following their funding.
What are the key drivers for opening an office in Europe?
- In 60 % of the cases, the opening is related to the aim of pursuing a sales and revenue growth opportunity. On average the European market represents 30 % of their global revenue. US companies are considering the 740 million people market and a GDP higher than in the US for this region. The European market is the largest overseas software market and a considerable growth lever.
- In 40 % of the cases, the set up of European operations is motivated by the building of R&D or Product development teams. The cost of Engineer teams and the high level of expertise make European destinations increasingly attractive. This move has been accelerated by the increasing cost of Engineers in Silicon Valley.
What Percentage of the workforces in each respective European location.
There we have a quite different picture. We see that 2nd choice locations grow more rapidly than the 1st office.
- Although London is the first office location voted by 60% of US firms, it counts hardly 33 % of the total workforce. This remains the highest rate compared to other locations.
- Ireland is the home of Inside sales teams, and it counts 19% of the total Workforce whereas 10% of US firms choose the country as the first office location.
- Destination as France and Germany, with a rather little number of 1st office opening, have 8 % of total workforces in each location.
- Paris concentrates most of the workforces in the country. In Germany, the workforces are equally divided across Berlin, Hamburg, Frankfurt, and Munich.
- In the Netherlands, workforces are divided between Amsterdam and Rotterdam.
What Profile hired?
33% of the first hires concern General Managers. 32 % concern Senior Sales.
Within the hired General Manager, 30 % had a previous experience as General Manager whereas 70 % are new to the role.
One can wonder how Brexit is impacting the choice of US firms when opening their first office in Europe. Well, new office openings in Europe dropped by about 60 % in 2020, partly explained by the pandemic.
Surprisingly, it does not seem to affect UK and London on a larger scale than other countries. It becomes obvious that most US company CEOs do not have a clear picture of the meaning and consequences of Brexit behind the fancy term. One exception may concern Fintech, as it is commonly publicized.
At the same time, existing European operations of US firms continue to hire at a high pace.
About the survey
This is the result of a survey among the top 175 US companies with a high profile in the B2B Software industry. Under review Zoom, Slack, Dropbox, Zendesk, Elasticsearch, Apptus, Dashlane, Hubspot, Docusign, Twilio, Apnexus, Cloudfare, Dropbox … just to name a few of them. We consider an office once it has at least 5 employees. This survey was conducted on companies that have been established in Europe in the last 15 years.
About US trade policies, you can consult the ITA ( US International Trade Administration)
When it comes to international expansions, a wrong choice can be very costly . We give you our advices on Going Global
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